New year to ring in lower cell phone charges

Andi Haswidi, The Jakarta Post, Jakarta

Indonesia's mobile-phone tariffs, now among the highest in Asia, are expected to fall by between 20 percent and 30 percent in the new year, with the coming into effect of new tariff regulations.

Heru Sutadi, spokesperson for the Indonesian Telecommunications Regulatory Body (BRTI), said Wednesday that the tariff cuts were likely as the new regulations would overhaul the pricing formulas and introduce tariff caps.

He said that the new tariff policy could result in a decline in voice and text message tariffs of between 20 percent and 30 percent.

"According to our calculations, the fall in tariffs will be quite significant. However, the final decision on the matter will be made later on by the information and communications minister after consulting the operators,"

Heru said that call tariffs here were the second highest in the Asia Pacific region due to the variable interconnection cost for calls between operators.

"If agreed, the new tariff formulas will significantly lower the interconnection charge," he said.

As for text message charges, he pointed out that while the actual interconnection cost was only Rp 75 per message, some operators were charging as much as Rp 350.

"Text message charges may fall by about 25 percent after the coming into effect of the regulation," he said.

Previously, a study released in August by Bandung's Padjadjaran University had concluded that there was plenty of room for operators to lower tariffs as their average earnings before interest, taxes, depreciation and amortization (EBITDA) ranged between 60 and 75 percent of their total revenues.

"As half of the EBITDA comprises profit, clearly there is still plenty of room to lower tariffs," chief researcher Ina Primiana said recently.

All operators, the study found, had reduced their charges between 2002 and 2007. However, these reductions were modest, with XL cutting tariffs for calls to other networks during this period by 20.59 percent, Indosat by 8.56 percent and Telkomsel by 2.52 percent.

The study was carried out between April and July of this year following a controversial study on the same subject by the University of Indonesia's Institute for Economic and Social Research (LPEM-UI). The latter study was released in May and pointed to what it claimed were indications of price fixing by the incumbent cellular operators, thus leading to unhealthy competition in the market.

Commenting on the possible reductions in charges, Indonesian Telecommunications Society (Mastel) chairman Mas Wigrantoro Roes Setiyadi said that while he supported the decision to cap tariffs, he also wanted to see the government introduce minimum charges to ensure fairer competition.

"A new player entering the industry usually seeks to grow its subscriber base by setting the lowest price possible, while ignoring the question of profitability. If minimum prices are not set, this could destabilize the industry," he said.

Referring to Mastel's position on the tariff issue, he said that it did not matter whether tariffs went up or down, as long as operators were able to deliver good services to the public.
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